The following is a summary of the real estate provisions of the Tax Cuts and Jobs Act (TCJA) signed into law by President Trump on Dec. 22, 2017.

Individual Rates (Temporary)

General tax rate and bracket reductions for individuals (top rate of 37 percent applies to income above $600,000 for joint filers, $500,000 for single filers). Increases the AMT exemption level and AMT exemption phase-out level. New rates and AMT rules expire after 2025. The 3.8% net investment income tax remains in effect.

Itemized Deduction Limit (Temporary)

Miscellaneous itemized deductions, previously subject to the two percent floor (e.g., investment management fees), are no longer deductible. Expires after 2025.

Corporate Tax Rate (Permanent)

Flat 21 percent tax rate for C corporations; repeals the corporate AMT.

Disallowance of Deductions for State and Local Income Tax and Property Tax (Temporary)

  • Limited to $10,000 per year.
  • No limit for real property taxes paid or accrued in connection with a trade or business. However, state income taxes that are payable by a non-corporate investor in a pass-through entity are subject to this $10,000 aggregate deduction limitation. For example, assume that Jeff is a 50 percent member of an LLC which owns an office building in Illinois. The LLC pays $200,000 in real property taxes, and has total net income of $500,000. Jeff’s 50 percent share of the property taxes ($100,000) is fully deductible for federal income tax purposes, but the Illinois income taxes that he pays on his 50 percent share of the net income (the state tax on his $250,000 share of the profits), along with (i) any other state income taxes he pays and (ii) any real property taxes he pays that are not associated with a trade or business, are subject to the $10,000 limit on state and local taxes that would be allowed as a deduction
  • Expires after 2025

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